Budget deal trims millions in taxes

Florida legislators plan a $500-million cut, which would include another sales tax holiday.

TALLAHASSEE -- Floridians can expect the second biggest tax cut in state history under a compromise worked out between Senate and House budget leaders.

Coming on top of a historic $1-billion tax cut last year, the Legislature's tax cut proposal this year is expected to total $500-million.

While the House has yet to formally announce the details of its tax cut package, negotiators from both chambers are generally in agreement about the bulk of the $500-million package.

Shoppers can expect another sales tax holiday, probably in August. The deal would continue to phase out the per-drink tax on alcohol the state levies at restaurants. Investors would get a break, too, as part of a compromise to continue winnowing the intangibles tax on investments. In addition, both the House and the Senate want to repeal a fee imposed on businesses that collect sales taxes.

Still under negotiation are specially targetted tax breaks aimed at an array of beneficiaries, from parents who buy diapers to hospitals to greyhound racetracks.

"The message we want to send is that families, citizens and small mom and pop businesses got a break on taxes," said Rep. Ken Pruitt, the House's chief budget writer.

Florida's tax-cutting zeal is part of a national trend. With a booming economy, unexpectedly high tax revenues and massive settlements with the tobacco companies, state legislatures across the country are increasing spending on programs even as they consider a wide variety of tax breaks. Some of the tax breaks in Florida would phase out taxes that were imposed during an economic downturn, when lawmakers were desperate for ways to balance the budget.

The tentative Florida budget deal, worked out late Friday and over the weekend, will help smooth negotiations as House and Senate negotiators put the finishing touches on a budget that is expected to top $50-billion.

In order to reach this point, both chambers had to give a little.

The tax cut package is nearly double the amount initially sought by the Republican-controlled Senate, but only slightly less than what was sought by Gov. Jeb Bush and the Republican-controlled House.

In return, the Senate won an agreement from the House to increase the amount to be spent on education, for a total increase of almost $1.1-billion over the current year.

The tax cuts that have tentatively been agreed to total almost $340-million, leaving lawmakers with a little over $160-million to play with. This session, lawmakers have floated dozens of special interest tax breaks, most of which will fall by the wayside.

But several expensive proposals to benefit specific industries are still seriously in the running as the House and Senate negotiate to fill in the tax cut blanks.

Lawmakers in the House are pushing a big tax break for hospitals and other medical facilities such as diagnostic imaging centers. The tax, currently 1.5 percent of the facility's revenue, is used to help the state pay for health care for the indigent. During a committee hearing today, lawmakers are expected to propose cutting the tax to 1 percent, a $28-million saving to the industry.

Hospitals have asked the Legislature for help this year, saying that their finances are troubled because of deep cuts by the federal government. The money, however, will have to be made up, meaning that the cost will shift to the general taxpayer. But lawmakers argue that hospitals are already passing the cost of the tax on to those who can afford to pay for treatment or insurance.

House lawmakers also want to help struggling greyhound tracks. A bill sponsored by Rep. Mike Fasano, R-New Port Richey, would give the tracks a $24-million tax break.

The entire parimutuel industry, which includes horse tracks and jai alai, paid a total of $58.8-million in taxes last year.

For Fasano, it's a question of equity: He said other pari-mutuel industries pay less than the greyhound tracks in tax. He also pointed out that other unregulated, untaxed gambling industries such as American Indian casinos and cruises to nowhere have hurt the industry.

Still, Fasano said, "I would be surprised if when it all comes down to the end we can give them as great of a tax break as I have proposed; it will probably shrink a little bit."

Another idea pushed by House lawmakers is the elimination, or possibly the reduction, of school impact fees. Counties charge school impact fees on new development as a way to pay for new schools necessitated by growth. If lawmakers eliminate the fee, reimbursing the counties that currently levy it will cost $80-million.

Finally, House lawmakers want to pass several "family-friendly" tax breaks. Those include an estimated $24-million sales tax break on diapers.

The Senate, meanwhile, has different priorities.

It is looking at a $26.4-million sales tax break for non-profit corporations.

In addition, the Senate wants to help businesses that pay estimated sales taxes. Currently, businesses must pay 60 percent of the sales tax they expect to owe before that money is actually collected. The Senate is looking at lowering that to 50 percent.

Sen. Jim Horne, an Orange Park Republican who is chairman of the Senate Fiscal Resource Committee, also wants a few targeted tax breaks to help select industries that could bring high-paying jobs to Florida. He mentioned a manufacturers' tax break and a space industry tax break as examples.

"The next step will be for me to meet with the House and figure out, "Okay, what do you really want?' " Horne said. "But I think both sides want to do good government stuff."